Colorado Life Insurance Regulations: Insurable Interest, Replacement, Group Insurance, Advertising and Annuities

Vocabulary flashcards covering key terms and definitions from the lecture notes on insurable interest, replacement regulations, group insurance, advertising, and annuities.

Insurable Interest

A life-insurance requirement that must exist at policy issue; in Colorado, an interest shown by love/affection or other legally recognized relationships in the insured’s life.

STOLI (Stranger-Originated Life Insurance)

Unlawful practice of wagering on life; considered an unfair or deceptive act.

Policy Replacement

A transaction where a new life policy replaces an existing one, triggering regulatory protections for the purchaser and listing eligible related parties.

Eligible parties for replacement

Relatives by blood or marriage within 5th degree, stepchildren/descendants, designated beneficiaries, trustees, guardians/fiduciaries, business entities in the insured’s life, or creditors.

Conservation

Efforts by the existing insurer or producer to discourage replacement; excludes routine administrative actions.

Nonforfeiture benefits

Options such as reduced paid-up insurance, extended term, or cash-value adjustments when a policy is altered or surrendered.

Replacing insurer

The insurer issuing the new policy in a replacement.

Existing insurer

The insurer that issued the policy being replaced.

Free-look period (new policy)

15-day period to review and return the policy for a full refund if unsatisfied.

Free-look period (replacement)

30-day period during a replacement transaction to review and return the policy.

Notice Regarding Replacement

A statement signed by the applicant and producer about existing policies, provided to the insurer.

Duties of the replacing producer

Provide replacement notice, list policies to be replaced, and furnish illustrations and disclosures as part of replacement proceedings.

Duties of the replacing insurer

Verify forms, notify affected insurers within 5 business days, provide disclosures, and maintain required replacement records.

Duties of the existing insurer

Provide replacement notice to the applicant, maintain policy lists, and share disclosures upon request.

Record Keeping of Replacements

Maintain replacement notifications and related materials for at least 5 years (or until next regular exam); preserve illustrations and statements.

Suicide (life insurance)

If the policy year has passed, suicide by the policyholder is not a defense to payment.

Lapse Notice

Notice of lapse for nonpayment is effective only with proper information and reason; an officer’s affidavit constitutes proof of notice.

Group Life Insurance

Life policies issued to a defined group (e.g., creditor groups, unions, employer groups) with uniform insurability standards; may extend to dependents; has conversion rights.

Grace period (group life)

31-day grace period for premium payment after the first premium.

Incontestability

After 2 years, the insurer cannot deny a claim due to application statements, except for nonpayment.

Entire Contract; Representations vs. Warranties

Policy plus attached application; statements are representations, not warranties.

Evidence of Insurability

Insurer may require proof of health or other factors before issuing coverage.

Misstatement of Age

If age is misstated, premiums/benefits are adjusted to reflect the correct age.

Certificate of Insurance

An individual certificate detailing coverage, beneficiaries, and rights, issued to the policyowner for delivery to the insured.

Conversion (Group policy)

Right to convert to an individual policy within 31 days after group policy termination; no evidence of insurability if insured at least 5 years; death during conversion period affects claims.

Assignment

Policyowner’s right to assign ownership or name a beneficiary.

Exemption from Execution

Group policy proceeds cannot be attached or seized to satisfy debts; generally not part of the insured’s estate.

Advertisements

Truthful, not misleading promotional materials; insurer is responsible for all ads; file copies for 5 years; nonguaranteed features must be labeled as non-guaranteed.

Annuity Disclosures

Regulations require minimum disclosures about annuities to protect consumers; include required documents and timelines.

Annuity Suitability

Consumer-profile-based assessment ensuring recommendations fit the customer’s financial situation and goals; requires documentation of the recommendation and supporting information.

Senior-specific Certifications

Restrictions on misleading senior designations; sanctions for misuse; certifications allowed only if not primarily sales-oriented and accredited.

Training for annuities

Initial 4-hour training plus 4 hours of CE each renewal period for those selling annuities.

Backdating

Limit on dating policies to reflect a younger age; generally not allowed beyond one year younger than the applicant’s age.

ERISA

Employee Retirement Income Security Act; group plans funded by employers and covered by ERISA.

Credit Life (exemption)

Credit life insurance is exempt from certain replacement regulations.